Board of
Directors
Regular Meeting
January 23, 2023
Welcome
&
Call to
Order
Roll
Call
4 Chandra Pugh
Director of People
SDCP
Welcomes
You!
Items to
be Added,
Withdrawn
or
Reordered
on the
Agenda
Public
Comment
for Items
NOT
on the
Agenda
8 Consent
Agenda
1. Approval of Findings to Continue Holding
Remote/Teleconference Meetings Pursuant to
Assembly Bill 361
2. Receive and File Treasurer’s Report for Fiscal Year-end Period Ending November 30, 2022
3. Receive and File Update on Back Office Operations
4. Receive and File Update on Marketing and Public
Relations
5. Receive and File Update on Community Advisory
Committee
6. Receive and File Update on Regulatory and
Legislative Affairs
7. Approval of Second Amendment to Professional
Services Agreement with Futura Energy Group to
add $70,000 for a total of $305,000 for Professional
Recruiting Services for FY2023.
9 Regular
Meeting
Agenda
Regular Agenda Items:
8. Election of Chair and Vice Chair for Calendar
Year 2023
9. Appointment of Members to the Finance and
Risk Management Committee
10. Approval of 2023 Rates
11. Approval of New Credit Agreement to
Implement New Line of Credit of $150,000,000
from JP Morgan Credit Facility
12. Approval of Amended and Restated Vikings
Power Purchase Agreement
13. Update on the Community Power Plan
10 Item 8
Election of Chair and Vice Chair for Calendar Year 2023 Recommendation:
Elect a Chair and Vice Chair for Calendar Year 2023
Presenters:
Ryan Baron, General Counsel
11 Item 9
Appointment of Members to the Finance and Risk
Management Committee
Recommendation:
Appointment of Members to the Finance and Risk
Management Committee
Presenters:
Ryan Baron, General Counsel
12 Item 10
Review and Approval of 2023 Rates
Recommendation:
Review and approve one of two rate adjustment options
effective 2/1/23. The options feature rates that are 3% or 5% less expensive than San Diego Gas & Electric's
electricity commodity rates that are effective 1/1/23.
Presenters:
Lucas Utouh, Director of Data Analytics & Account Services Tim Manglicmot, Finance Manager
13 Rate Development Policy Objectives
Objectives
Priorities
Cost
Recovery
Rate
Simplicity
Transparency
Avoid Cost- Shifting
Reserves
Rate
Competitiveness
Rate
Stability
Equity Cost of
Service
Strategic Goals
Adopt plan to increase reserves to $175M
by 10/23 (90-Days Cash On Hand) and
$360M by 10/25 (180-DCOH).
Obtain an investment grade credit rating
by Nov. 2025 (180 DCOH).
Develop Rate Stabilization Reserve of
$70M
Develop/secure Clean Energy Portfolio
with goals of 50% renewable energy ('22),
75% ('27), 85% ('30), and 100% ('35).
15% of our energy coming from new,
distributed infill storage/solar+ storage
resources by 2035.
14 SDCP
Rates
SDG&E
Generation Rates
PCIA Franchise
Fee
January 2023 SDG&E
43% average increase
January 2023 SDG&E
Varies by Customer & Vintage
Customer
Residential
Small Commercial
Medium & Large C&I
Agriculture
Lighting
Vintage Year
Vintage 2020 – Phase 1 & 2
Vintage 2021 – Phase 3
Vintage 2022 – Phase 4
Unchanged 2023 SDG&E
1.088% x SDG&E
February 2023 SDCP
Rate Mechanics
15 Jan
2022
Feb
2022
May.
2022
June.
2022
Nov.
2022
Dec.
2022
Jan.
2023
Feb.
2023
SDG&E 2022
rates and PCIA
effective Jan. 1
SDCP Board
adopted 2022
rates
SDCP’s 2022
rates effective
Feb. 1. Phase
3 commenced
SDG&E
submitted
application for
its 2023 ERRA
& Electric
Sales Forecast
SDCP’s Phase
3 conclusion
for Non-NEM
customers
SDG&E rate
change
CPUC’s Final
Decision on
2023 ERRA &
Electric Sales
Forecast
Application
SDG&E’s
November
ERRA update
SDCP’s Rate
Development
Policy Review
By CAC and
Board and its
adoption.
Board/Committee
review of 2023
rate expectations
Board reviews
& adopts 2023
rates
SDCP’s 2023
rates effective
no later than
Feb. 15
SDG&E 2023
rates and PCIA
effective Jan. 1
SDCP’s Rate Development Timeline
16 FY24 Cost of Energy Projection
400
800
1,200
J A S O N D J F M A M J J A S O N D J
Non-Energy
Energy
$ Millions
2021 2022 2023
FY24 Expense Projections +48.2%
FY24 Cost of Energy
Increase
Jan 22 to Jan 23
17 FY25 Cost of Energy Projection
400
800
1,200
J A S O N D J F M A M J J A S O N D J
Non-Energy
Energy
$ Millions
2021 2022 2023
FY25 Expense Projections +54.5%
FY24 Cost of Energy
Increase
Jan 22 to Jan 23
18 FY25 Year-End Projected Reserves
January 2022
$373.9 million
Rate Setting
June 2022
$145.4 million
Budget Adoption
January 2022
(Rate Setting)
December 2022
$88.5 million
December Estimate
180-Day Target
$500.0 million
Strategic Goal
June 2022
(Budget Adopted)
December 2022
(Current)
Largely due to rising energy costs,
SDCP’s reserve projection has
decreased throughout calendar year
2022.
SDCP currently has a 90-day cash on hand reserve target and has a strategic goal to obtain 180-days cash on hand.
January 2023
(Rate Setting)
90-Day Target
$250.0 million
Current Reserve Target
19 Why Reserves?
180-Day Target
$500.0 million
Strategic Goal
Power
Purchase
Agreements
Rate
Stability
Debt
Issuance
Long-Term
Financial
Health
Programs
Leveraging Funds
90-Day Target
$250.0 million
Current Reserve Target
January 2023
(Rate Setting)
20 Rates
Rate Competition and PCIA
SDG&E remains a direct competitor to SDCP and investor-owned utilities generally remain in competition with their CCA counterparts. In June 2022, for example, SDG&E
unexpectedly lowered its rates. A 25-point reduction in SDG&E rates on 1/1/24, for example translates in up to
~$600M in net income if SDCP reduces rates in lockstep. $600 million
annually
Forward Energy Prices
Energy commodities remain SDCP’s
largest expense and fluctuate
At the 1/20/22 Board meeting SDCP expected expenses to
average $628.6M annually from FY24-FY26. In SDCP’s
latest January forecast, expenses average $965.8M
annually from FY24-FY26 mainly due to changes in
forward energy prices.
$340 million
annually
Participation Rates
CCA participation rates range from
80% to 97%
At the 12/15/22 Board meeting participation rates for
Phase 1 & 2 customers was reported at 95.7% and for
Phase 3 customers at 96.5%. The 5-year forecast
assumes a 95% participation rate; other CCAs report
participation rates as low as 80%. An 80% participation rate would drop SDCP net income by ~$100M annually.
$100 million
annually
Heat Wave
Additional, unhedged energy needs
in a heat-wave scenario
SDCP modeled a scenario for what a “bad month” in
summer 2022 could look like with regard to cashflow. The two key drivers of the analysis were day-ahead market
exposure and DA-RT imbalance cost as summarized here
with notes and assumptions below.
$22 million
annually
Risk Factors – Impact to Net Income
21 Scenario 1. Recommendation.
3% Value Proposition.
• 90-days reserve: Jun 2023
• 180-days reserve: Oct 2023
• Reserve targets achieved prior
to next rate setting
Scenario 2.
5% Value Proposition.
• 90-days reserve: Jun 2023
• 180-days reserve: Jul 2024
• Power100 lower than SDG&E
base rates
43% Average Increase
• Increase effective 1/1/23
Scenarios
22 56.6
161.2
309.9
63.9 81.0
0 200
400
600
800
1,000
1,200
1,400
1,600
FY22 FY23 FY24 FY25 FY26
90-Day Threshold
Jun 2023
$M
Operating Budget, $M FY22 FY23 FY24 FY25 FY26
Net Revenue 383.8 929.8 1,284.0 1,067.9 1,107.0
Total Expense 327.2 768.6 974.1 1,004.0 1,026.0
Annual Reserve (Net Income) 56.6 161.2 309.9 63.9 81.0
Reserves (Cumulative Net Surplus) 42.5 203.7 513.6 577.5 658.6 90-Day Expense Target 81.8 192.2 243.5 251.0 256.5
180-Day Expense 163.6 384.3 487.1 502.0 513.0
180-Day Threshold
Oct 2023
Scenario 1: 3% Value Proposition
23 56.6
161.2
309.9
63.9 81.0
0 200
400
600
800
1,000
1,200
1,400
1,600
FY22 FY23 FY24 FY25 FY26
90-Day Threshold
Jun 2023
$M
Operating Budget, $M FY22 FY23 FY24 FY25 FY26
Net Revenue 383.8 929.8 1,284.0 1,067.9 1,107.0
Total Expense 327.2 768.6 974.1 1,004.0 1,026.0
Annual Reserve (Net Income) 56.6 161.2 309.9 63.9 81.0
Reserves (Cumulative Net Surplus) 42.5 203.7 513.6 577.5 658.6 90-Day Expense Target 81.8 192.2 243.5 251.0 256.5
180-Day Expense 163.6 384.3 487.1 502.0 513.0
2023
Only year with
reserve certainty
FY23 to FY24
Jan 2024
Will need to re-examine rates
Scenario 1: 3% Value Proposition
24 Scenario 1: Bill Impact
25 Scenario 1: Bill Impact
26 Scenario 1: Bill Impact
27 Scenario 1: Bill Impact
28 56.6
151.3
280.5
39.1 55.5
0 200
400
600
800
1,000
1,200
1,400
1,600
FY22 FY23 FY24 FY25 FY26
90-Day Threshold
Jun 2023
$M
180-Day Threshold
Jul 2024
Operating Budget, $M FY22 FY23 FY24 FY25 FY26
Net Revenue 383.8 920.0 1,254.6 1,043.1 1,081.4
Total Expense 327.2 768.6 974.1 1,004.0 1,026.0
Annual Reserve (Net Income) 56.6 151.3 280.5 39.1 55.5
Reserves (Cumulative Net Surplus) 42.5 193.9 474.3 513.4 568.9 90-Day Expense Target 81.8 192.2 243.5 251.0 256.5
180-Day Expense 163.6 384.3 487.1 502.0 513.0
Scenario 2: 5% Value Proposition
29 Scenario 2: Bill Impact
30 Scenario 2: Bill Impact
31 Scenario 2: Bill Impact
32 v
Three sets of rates are needed in 2023
to balance this nuance.
Trifurcation will ensure a fair, equitable
and balanced rate structure for all
customers.
Trifurcation of Rates by Vintage
33 v
Summary
Customer savings are increased to either 3% or 5% compared to SDG&E. At 5% savings, SDCP’s 100% renewable and 100% carbon-free Power100 electricity service will be at parity on average with SDG&E’s base product, which is composed of approximately 45% renewable content.
Higher renewable content (base product: 54.9% with SDCP vs 44.5% with SDG&E as of the most recent Power Content Label in 2021).
Contributions towards reserves that allow SDCP to achieve its 90-day cash on hand reserve target in 2023 which will provide financial stability. Prepares SDCPfor expected and unexpected market and cost shifts in 2023. Satisfies credit obligations.
Three sets of rates are needed in 2023 to ensure a fair, equitable and balanced rate structure for all customers.
34 Item 10
Recommendation:
Review and approve one of two rate adjustment options
effective 2/1/23. The options feature rates that are 3% or 5% less expensive than San Diego Gas & Electric's
electricity commodity rates that are effective 1/1/23.
35 Item 11
Approval of New Credit Agreement to Implement New
Line of Credit of $150,000,000 from JP Morgan Credit
Facility
Recommendation:
Approval to authorize the CEO or CFO to execute a new
credit agreement and related documents necessary to
implement a new line of credit of $150,000,000 from a JP Morgan credit facility.
Presenter: Dr. Eric Washington,
Chief Financial Officer
36 Execute New J.P. Morgan Credit Agreement
for $150M
Provider of Last Resort
Rulemaking (POLR). CPUC
initiated a Rulemaking to
develop POLR rules based on
requirements of SB 520.
Rules to prevent IOUs from
incurring charges in an
event of a CCA failure.
May 2021 May 2022
Financial Security
Requirement (FSR). IOUs
filed a recommendation update
to POLR rules regarding FSR
calculations. Analysis
determined the update would
increase risk to CCAs up to
$125M.
Oct 2022
Request-for-Proposal. PFM
Financial Advisors issued an
RFP on behalf SDCP for a
line of credit. J.P. Morgan
subsequently submitted a
proposal for $150 million line
of credit.
Jan 2023
SDCP Board Action.
Approve the Credit Agreement
with JPM and authorize the
CFO (or his designee) to
finalize the terms of the Credit
Agreement and the exhibits
thereto and ) execute Credit
Agreement, Fee Agreement,
Note, and such other ancillary
agreements.
Recommendation: Authorize the CFO or CEO to execute a new credit agreement and related documents necessary to implement a $150 million line of credit for up to 5 years. 37 Approve New J.P. Morgan Credit Agreement
for $150M
Unexpected Power Costs
Provides SDCP with additional
resources to respond fiscally to
unexcepted rises in the power
supply costs.
Credit Rating
Supports SDCP with added
liquidity that will position the
agency to establish a stronger
credit rating.
Unexpected Climate Conditions
Allows SDCP to react quickly to
unexpected changes in customer
demand and market conditions.
Increased Risk from POLR
Supports SDCP in substantial
increased risk incurred from
POLR rule updates regarding
financial security requirements.
38 Prior Line of Credit
$50.0m
(to be closed)
New Line of Credit
$150.0m
Loan Type • Commercial Revolving Line of Credit (“RLOC”) Purpose
• To support increased financial risk incurred by regulatory proceedings
• To support working capital as needed
• To support the issuance Letters of Credit
Interest Rate
Note: As of 11/11/2022
1-Month SOFR is 3.79%
3-Month SOFR is 4.26%
6-month SOFR is 4.62%
• SOFR or ABR: SDCP may elect that interest on each Loan be based off either the Adjusted Term SOFR Rate or the Alternate Base Rate (“ABR”).
• For SOFR Loans: Taxable Loans will accrue interest at a rate per annum equal to the one, three, or six-month (as selected by SDCP) Adjusted Term SOFR Rate, subject to availability, plus the Adjusted Term SOFR Rate Applicable Margin.
• For ABR Loans: Loans will accrue interest at a rate per annum equal to the ABR plus the ABR Applicable Margin.
Repayment • Loans shall be due and payable in full, together with all accrued interest thereon, on the maturity date of the Facility.
Approve New J.P. Morgan Credit Agreement
for $150M
39 Item 11
Recommendation:
Approval to authorize the CEO or CFO to execute a new
credit agreement and related documents necessary to
implement a new line of credit of $150,000,000 from a JP Morgan credit facility.
40 Item 12
Approval of Amended and Restated Vikings Power
Purchase Agreement
Recommendation:
Approval of Amended and Restated Renewable Power Purchase Agreement with Vikings Energy Farm, LLC in substantially the form attached hereto, with such changes as are approved by the Chief Executive Officer and reviewed and approved as to form by General Counsel, and authorize the Chief Executive Officer to sign the Agreement.
Presenters:
Byron Vosburg, Managing Director Power Services
41 Approval of Amended and Restated Vikings
Power Purchase Agreement
Project Overview: Vikings Energy Farm, LLC
• Board approved April 22, 2021
• SDCP signed PPA May 3, 2021
• 100 MW Solar, 150 MW/600 MWh Battery Storage
• Location: Holtville, Imperial Co, CA
• Guaranteed Commercial Operation Date: June 30, 2023
• Contract Term: 20 years
• Expected Annual Energy Production: ~270,000 MWh/year
• Equivalent of ~55,000 San Diego Co households
• Guaranteed Energy Production: 85% of projected annual deliveries • Solar Energy Price: fixed, no escalation over 20-year term • Capacity Price: fixed, no escalation over 20-year term • No credit or collateral obligations for SDCP
42 Approval of Amended and Restated Vikings
Power Purchase Agreement
43 Approval of Amended and Restated Vikings
Power Purchase Agreement
44 Approval of Amended and Restated Vikings
Power Purchase Agreement
Updates:
• Sept 2021: Vikings Energy Farm, LLC acquired by
Arevon Energy
• 2021-2022: Pandemic and supply-chain impacts cause
widespread delays and price increases in renewable
energy and battery storage development; Arevon and
Vikings are impacted
• 2022: SDCP and Arevon brainstorm options to ensure
Vikings Energy Farm can remain viable, with as little
impact to SDCP customers as possible
• January 2023: SDCP and Arevon complete an
Amended and Restate PPA, presented today for board
review
https://www.energy-storage.news/unprecedented-market-conditions-force-pge-to-up-price-on-2gwh-of-battery-storage-contracts/ https://www.utilitydive.com/news/solar-storage-delays-price-supply-chain/620537/ 45 Approval of Amended and Restated Vikings
Power Purchase Agreement
PPA Overview: Vikings Energy Farm, LLC (Amended and Restated) • Solar Capacity: 100 MW 136.8 MW
• Storage Capacity: 150 MW/600 MWh 145.5 MW/582 MWh
• Guaranteed Commercial Operation Date: June 30, 2023
• Battery Storage COD: April 1, 2024
• Solar PV COD: September 1, 2024
• Contract Term: 20 years
• Expected Annual Energy Production: ~270,000 MWh/year ~370,000 MWh/year • Equivalent of ~55,000 ~75,000 San Diego Co households • Guaranteed Energy Production: 85% of projected annual deliveries • Solar Price: (↓) fixed, no escalation over 20-year term • Storage Price: (↑) fixed, no escalation over 20-year term • No credit or collateral obligations for SDCP
• Significant collateral obligations (↑) for Vikings to ensure that SDCP customers are not harmed if project is delayed further 46 Item 12
Recommendation:
Approval of Amended and Restated Renewable Power Purchase Agreement with Vikings Energy Farm, LLC in substantially the form attached hereto, with such changes as are approved by the Chief Executive Officer and reviewed and approved as to form by General Counsel, and authorize the Chief Executive Officer to sign the Agreement.
47 Item 13
Update on the Community Power Plan
Recommendation:
Receive and File the Update on the Community Power Plan Presenter
Colin Santulli, Director of Programs
48 Community Power Plan: Overview
Community
Power Plan
Community
goals, needs,
and priorities
Organizational
goals, needs
and priorities
Existing
Programs &
Awareness
Funding
Availability
SDCP’s 5-year
strategic plan for
customer energy
programs
49 Timeline
Q3 & Q4 2022
*
Engage
with community
members
Survey
community to
determine
most prioritized
issues
Report back to
the community
on findings
Assess
programs and
draft CPP
document
Draft
Community
Power Plan
presented for
public comment
Listening Sessions
Co-hosted with
community-based
organizations
Interest groups
General public
Businesses
Community-wide
Survey
Community
priorities and
program
interest
Reporting
results of
survey &
Listening
Sessions
Database of
possible
programs
Ranked list of
programs
that meet
needs
Community Power Plan
Q3 2022 Q4 2022 Q1 2023
Program Prioritization
Framework
51 Universe of Programs
Market Assessment
• Analysis of programs from
CCAs, state agencies (e.g.,
CARB, CEC), and IOU
• Interviews with 10
CCAs/program implementers
Program
Database
• 200+ programs
• ~70 program options
Program Prioritization Framework
52 Program Prioritization Framework
Program
Elements
Program Category
Building/Transportation/Equipment Electrification, Distributed Energy Resources, Energy Efficiency, Codes & Standards, Demand Response
Technical Element
Heat Pumps, Appliances, Electrical Panels, LD/MD Electric Vehicles and Chargers, Battery Storage, Onsite Solar, Community Solar, Smart Devices, Energy Efficiency Measures, Peak Demand Behavior
Delivery Element
Rebates, Bill Credits, Grants/Funds, Other Incentives, Free Equipment/Direct Installations, Rates, Technical Assistance, Application Assistance Customer Segment
Low-Income/Disadvantaged Communities, Public Sector, Commercial, Market Rate 53 Program Prioritization Framework
Community Priorities Weighting
Each program element was scored based on
its ability to address the energy issues learned
from the community needs survey.
Organizational Priorities Weighting
Each program element was scored based on
its ability to meet internal goals and priorities
learned from the Board interviews, CAC, and
Staff workshops.
Impact to
Revenues
(Fiscally
Responsibility)
Equity by
investing in
Communities of
Concern
Increased
Education/
Awareness of
Energy
Maximize Infill
Generation &
Storage
Visibility Ability to Manage
Load Flexibility
18% 20% 16% 16% 17% 13%
Board/CAC/Staff Prioritization Weighting
Program Strategy
55 Program Strategy
• External funding sources
developed
• Better positioned to direct
internal revenues to
customers via programs
• Require more time to
establish, or for funding to
start flowing
• Require identifying and
gathering additional data
Examples: equipment rebates
and incentives, energy
efficiency programs, etc.
• More complex program design
• Unique rates that require
established presence with
customers
• Support emerging emission-reducing technologies
• Update customer preferences
and market data
Examples: Innovative financing,
rate design etc.
Short-Term
FY23/24 – FY24/25
Mid-Term
FY25/26 – FY26/27
Long-Term
FY27/28+
• Fill immediate needs on
customer education and
awareness
• Access available programs
currently underutilized
• Leverage existing external
funding and/or minimal
SDCP funding commitment
• Pilots to prepare for mid-term
broader incentive programs
Examples: Community Solar,
customer education initiatives,
application assistance, etc.
Next Steps
57 Next Steps
Public Draft of the Community Power Plan
• Develop draft list of program types for public draft
• 30-day public comment period expected in March 2023
• Re-engage with stakeholders, customers, interest groups to gather feedback on draft
• Final draft taken to the Board for adoption consideration expected in May 2023 58 Item 13
Recommendation:
Receive and File the Update on the Community Power Plan Report by
Chief
Executive
Officer
and
General
Counsel
Director
Comments
Adjournment
February 23, 2023
Next Regular
Board Meeting